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The Impact of Lifting Firing Restrictions on Firms: Evidence from a State-Level Labor Law Amendment

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dc.contributor.authorChaudhary, Sarur
dc.contributor.authorSharma, Siddharth
dc.date.accessioned2022-05-13T15:47:32Z
dc.date.available2022-05-13T15:47:32Z
dc.date.issued2022-05-09
dc.description.abstractStringent employment protection laws are argued to be a cause of reduced employment flexibility, slower growth and increased reliance on temporary employment contracts in many countries, including India. In 2014, the Indian state of Rajasthan amended labor laws to increase employment flexibility in firms. The most discussed of the amendments lifted the requirement for government approval for retrenching regular workers in medium-size factories. This paper first conducts a synthetic control analysis of the policy change using state-level panel data from 1980 to 2018, finding no evidence of an impact on aggregate manufacturing employment and output. The paper then uses firm-level panel data to conduct a difference-in-differences analysis of the main amendment, exploiting its size-dependent feature for identification. This analysis finds that the amendment reduced the implicit regulatory cost of labor in firms, but there is no discernible impact on their total employment and output. The amendment also led to firms substituting temporary (“contract”) workers for permanent workers. This collateral impact is contrary to the expectation that easing the flexibility of permanent employment arrangements would make them more attractive to firms.en
dc.identifierhttp://documents.worldbank.org/curated/en/099751205092221721/IDU0de829349018930480b0a4ba0e627b6576af2
dc.identifier.doi10.1596/1813-9450-10039
dc.identifier.urihttps://hdl.handle.net/10986/37417
dc.languageEnglish
dc.publisherWashington, DC: World Bank
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectLABOR REFORM
dc.subjectDISTRIBUTION OF WORK
dc.subjectTRADE UNIONS
dc.subjectLABOR UNIONS
dc.subjectWORKFORCE
dc.subjectLABOR PRODUCTIVITY
dc.titleThe Impact of Lifting Firing Restrictions on Firmsen
dc.title.subtitleEvidence from a State-Level Labor Law Amendmenten
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.date.disclosure2022-05-09
okr.date.lastmodified2022-05-09T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099751205092221721/IDU0de829349018930480b0a4ba0e627b6576af2
okr.guid099751205092221721
okr.identifier.doi10.1596/1813-9450-10039
okr.identifier.externaldocumentum33813053
okr.identifier.internaldocumentum33813053
okr.identifier.reportWPS10039
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099751205092221721/pdf/IDU0de829349018930480b0a4ba0e627b6576af2.pdfen
okr.region.countryIndia
okr.topicLaw and Development::Labor & Employment Law
okr.topicSocial Protections and Labor::Labor Law
okr.topicSocial Protections and Labor::Labor Management and Relations
okr.topicSocial Protections and Labor::Labor Policies
okr.topicSocial Protections and Labor::Trade Unions
okr.unitOffice of the Chief Economist (SARCE)
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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